Tag Archives: FORT_250

An example of creating a map in an area of the Waynesboro Watershed using Google Maps

Management area in the Waynesboro Reservoir.

Will Hardwood Mills Become Like Organic Farmers?

This recent article in MSNBC paints a bleak picture for hardwood sawmills due to the decline in the housing industry and the loss of the furniture industry. Prices for lumber are dropping:

“The prices are, they’re where they were 20 years ago,” says Woodyard, who has more than two decades in the business. “To be profitable you’ve got to watch all your P’s and Q’s and eliminate all the fat in the payroll.”

Prices vary by factors such as species and grade, as well as negotiations with buyers, but Woodyard says the price of cabinet-grade lumber has slumped in some cases to $900 for 1,000 board feet. For years that price was $1,200 and at times as much as $1,400.

Another factor has been the change in styles that are now favoring light colored hard maple and poplar over the darker red oak.

Employment in the logging and sawmill industries has dropped dramatically in recent years.

How to survive the changes in the industry is the biggest challenge for sawmills, loggers, and landowners. Urs Buehlmann from Virginia Tech:

… thinks Europe may have a solution. Surviving Western European mills have shifted to made-to-order furniture and cabinet manufacturing. “They’re pretty much customizing the kitchen to your specifications,” he says. “I strongly believe this will be the guide.”

This reminds me of other stories I have heard about organic farmers. They are able to make a profit by producing high quality vegetables and fruits that they sell in farmer’s markets in big cities. The sawmill owners would have to create relationships with home builders and designers in high-income areas of larger cities, but it could certainly pay off.

Another solution that the article mentions is banning log exports, but that brings its own problems.

TIMOs, REITs, and Taxes

Yesterday in Forest Management Practices we discussed the transfer of commercial forest lands from VIFPCs (Vertically Integrated Forest Product Companies)  to TIMOs (Timber Investment Management Organizations) and REITs (Real Estate Investment Trusts) over the last 25 years or so.

In spite of all the criticism of the vertically integrated companies over the years, they had at least a long term, multi-dimensional interest in their lands. The new owners have mostly a short-term, maximize profit goal. No matter how you look at it this can’t be healthy for the forests in the long run. Fragmentation and parcelization are just part of the problems. The unwillingness to engage in long term investments in the forest is another.

What really surprised me from the article I used in class, was that this is in large part a by-product of the tax policies.  Companies wanted to limit their taxes. A VIFPC has to pay both corporate income tax (35%) and stockholders pay capital gains taxes (15%). The new ownership arrangements only pay the capital gains taxes, if that.

I have always thought companies should be required to pay corporate income taxes. But maybe there is some justification to the idea that companies don’t really pay taxes, they just pass them on to their customers. At the very least, Congress has to be very careful when they are creating new tax law to avoid unintended consequences like this.

Anecdotal vs. Scientific Evidence

In Forest Management class two days ago we were discussing an article on the parcelization of forest tracts in New York State. Parcelization, by the way, is the process where larger tracts are subdivided, for multiple reasons, into smaller tracts.

At one point the authors discuss how they had noticed increased parcelization over a period of time and a strong tendency for liquidation cuts before the sale. The owners harvest a large portion of the volume to capture its value before sending.

This was essentially anecdotal evidence; meaning that they had heard of it in stories from other people or seen it themselves. Andecdotal evidence is not scientific evidence, however. That means there wasn’t a systematic, scientific study to study the extent and severity of parcelization. Their research project, which included a survey of landowners, a detailed forest inventory of sampled tracts, and a statistical analysis, was designed to give reliable answers. If the scientific studies couldn’t give definitive answers, it can tell us what is the missing information.

Anecdotal evidence alerts us to a problem and gives us some indication as to what is going on. The scientific studies are needed to get some rational answers.